Using Social Media Is Not the Same as Using Social Media

Yes, you read it right. No typo here. Just because some marketers employ social media tools such as blogs or online social networks (OSNs) does not mean they capitalize on the potential power of social media.

In general, social media are earned media where marketers participate in ongoing, many-to-many conversations (dialogues), engage consumers for their insights, and earn their interest and trust with which to build relationships and brand loyalty. These conversations can be initiated by either marketers or consumers. They cannot be treated as another marketing channel owned and controlled by marketers (an earlier post “Markets are conversations“). By contrast, traditional media are usually paid media (e.g., TV and radio commercials, magazine ads, and paid key word search) or owned media (e.g., corporate websites) with which marketers can broadcast (in a one-to-many fashion) their well crafted monologues (a.k.a. advertisements). Consumers have very few, if any, opportunities to interact or contribute their own messages.

Putting an advertisement on a popular blog or Facebook does not amount to using social media. It simply treats these social media as “media” – a channel of marketing communication paid for by marketers; there is nothing “social” about it. Likewise, maintaining a corporate blog or creating a product page on Facebook does not by itself amount to capitalizing on the power of social media if the company simply uses these media to continue publishing its product information, brochures or press releases. In such case, it treats these media simply as owned media (it does not own Facebook of course, only its Facebook product page). It only use these media as social media when a corporate blog or Facebook product page is designed to support social interactions – engaging consumers in a meaningful conversation and letting them bring more friends into it, allowing them to share their consumption experience and contribute content, and/or crowdsourcing product design ideas.

Here is my key takeaway. What distinguishes between social media and traditional media is not the technology or means of communication (e.g., analog vs. digital, or Web 1.0 vs. Web 2.0 era software applications, or whatsoever). Rather, it is the marketing mindset that shapes the information flows (many-to-many vs. one-to-many), underlies the relationship between the senders and receivers of the messages (dialogues vs. monologues) and defines the nature of the media used (e.g., paid and owned media vs. earned media). In other words, it is not which media they are but how they are used that determines whether a marketer is using social media.

Time’s Person of the Year, 2006 and 2010

It’s that time of the year when we are anxiously waiting for the announcement of Time’s Person of the Year – the individual (or organization, thing, etc.) judged by the magazine’s editors to have most influenced the world over the past 12 months.

The selection for 2010 was Mark Zuckerberg, the founder of the leading online social network Facebook. Only four years ago, “You” were selected Time’s 2006 Person of the Year. In both cases, the selection recognizes the transformational effects of what was known more widely then as Web 2.0 and more recently as social media.

“You” in 2006

At the turn of the last millennium, in the aftermath of the dotcom crash, many academic researchers were busy drawing lessons from the demise of the dotcoms, issuing calls for a return to business fundamentals, and even recasting the future of e-commerce. They apparently failed to notice that amidst the rubble of the dotcom crash, Internet-based e-commerce continues to rise at double-digit rates, as measured by online retail sales and advertising revenues (after a brief decline in the latter case). A few dotcoms (among them were Google, eBay and Amazon) had not only survived the crash but also prospered. Meanwhile, a new crop of dotcom ventures (among them were YouTube, MySpace, Orkut, Wikipedia, Hi5, and Facebook) was once again mushrooming. Many had become leading Web destinations and household names.

For some practitioners, these developments did not go unnoticed. In 2004, during a brain-storming session between O’Reilly Media and MediaLive International for a potential future conference about the Web, it was noted that the Web was still getting more important than ever despite the dotcom crash a few years earlier. The term Web 2.0 was coined to capture the essence of what seemed to be some kind of turning point for the Web. Its “2.0” designation does not imply a new version of some old software applications. Rather, it underlines a very different Web. The earlier Web (or Web 1.0, if you will) was structurally hierarchical, ruled by webmasters and offered static websites that were broadcasted and distributed mostly through hypertext links. By contrast, Web 2.0 is characterized by open communication, decentralization of authority and freedom to share and re-use content. It allows individuals to publish, collaborate and share experiences with other like-minded individuals and groups on a scale never seen before, thus bringing together the small contributions of millions of people and making them matter.


Who are those individuals making such contributions? The answer is “You”. By creating Facebook profiles, building Second Life avatars, recording podcasts, blogging about political candidates, social causes or simply cooking recipes, connecting with one another, and/or spreading the viral messages, “You” (or more precisely, tens of millions of people like you) have wrested power from the few (e.g., newspaper editors, broadcasters, marketers and advertisers). In the process, you have not only changed the world; you have also changed the way the world changes. It did not take very long for this transformation to become well recognized. In December 2006, Time selected “You” as its Person of the Year “for seizing the reins of the global media, for founding and framing the new digital democracy, for working for nothing and beating the pros at their own game”.

Him (Mark Zuckerberg) in 2010

The proliferation of content-centric Web 2.0 tools such as blogs, podcasts, and video and video sharing sites once again brings to the forefront the notion of “Content is King”. This notion went back at least as far as 1996 when Microsoft co-founder Bill Gates wrote in an online column that “content is where I expect much of the real money will be made on the Internet”. But things did not out quite well as often touted. Content in the Web1.0 era was for the most part commercially generated content (CDC), which was too expensive to create and update frequently, and being non-engaging with consumers, also ineffective in relationship building (read my other blog post “Is [Commercially Developed] Content King?“). Content in the Web 2.0 era, by contrast, has increasingly been user-generated content (UGC), from blog posts and comments on them, entries on Wikipedia, videos on YouTube, profiles on Facebook, to virtual worlds and avatars on SecondLife. More than just content pieces, these are vehicles for users to share ideas, contribute knowledge, collaborate on projects, support common causes, build communities, or simply connect with each other. Web 2.0 tools are therefore as much about connectivity and collaboration as about content generation. They are thus social media. As media, they offer the means or instruments for delivering content of one kind or another (e.g., news, information, ads or entertainment). Being social, they help improve our ability to connect, communicate, and collaborate (read my other blog post “Social Media: More ‘Social’ than ‘Media’“).

It is the ability to connect that makes content generation more powerful and collaboration feasible. Blogs can be powerful when they are commented and hyperlinked, potentially turning themselves into running conversations and passionate debates that can mobilize the mass. Tweets can be powerful despite their 140-character limits. They can reach out to a large number of followers and keep them updated in real-time. Wikis can be powerful, as Wikipedia has amply demonstrated, thanks to their ability to harness the collective efforts and intelligence of the mass on a scale not possible until recent years. Still no social media tools to date can match the power to connect offered by online social networks (OSNs) such as Facebook. Its user population had crossed the 500 million mark in July 2010, placing it third in size behind only China and India. Half of its users log in on a daily basis. Each user has an average of 130 friends and creates 90 pieces of content a month. For “connecting more than half a billion people and mapping the social relations among them; for creating a new system of exchanging information; and for changing how we all live our lives”, Time selected Facebook founder as its 2010 Person of the Year.

What do Amazon, Apple, eBay, Facebook and SalesForce have in common?

View this presentation — Increasing Returns — a Key Principle of the Information Economy — on Prezi.com

The most obvious answer to the above question — “What do Amazon, Apple, eBay, Facebook and SaleForce have in common?” — is that these companies all conduct their business exclusively, or extensively, over the Internet. That answer is technically correct but it misses a key element for understanding the information economy. The true success of these companies lies in their ability to leverage increasing returns to their competitive advantage.

Take Amazon as an example. Amazon’s decision to let other retailers, from large retail chains (e.g., Macy and Target) to mom-and-pop resellers to sell their merchandise on its Website, often in direct competition with its own retail offerings, had many skeptics at first; but no more. By transforming itself from simply a retailer into a retail platform (more on the platform concept in a later post), it is able to expand its lead as “Earth’s Largest Selection” (not just Earth’s Largest Retailer originally). With so many resellers offering a vast range of merchandise on its Website, Amazon has fortified its position as a one-stop retail destination for millions of online shoppers; if shoppers can find everything at Amazon, why would they waste time going to many other places. Thus, the more retailers Amazon can attract to its Website, the more attractive it becomes to online shoppers; as more people shop at Amazon, the more attractive its Website becomes to other retailers. The network effect is at work.

Consider Apple. Its iPhone and iPod Touch are marvelously designed. By themselves, they offer little value to their users. But the thousands and thousands of applications, available via Apple AppStore, let users add a wide range of selected functionality to these products. The more apps are available, the more attractive the iPhone and iTouch become; the more people owning them, the stronger is the incentive for developers to build applications for the iPhone and iTouch. Billions of downloads from the AppStore tell the story. Once again, the network effect is at work.

How about eBay? There are other consumer auction sites out there; but none comes close to eBay. Why goes anywhere else. As more sellers list their merchandise on eBay, more buyers find eBay an attractive place to buy; and as more buyers look for merchandise on eBay, more sellers become interested. Should I keep on saying the network effect is at work?

Look at Facebook. It was trailing far behind MySpace until it decided in May 2007 to let independent software developers to build applications for Facebook (and earn a share of advertising revenues). As more such applications become available, users can do more things (e.g., sharing shopping info with friends) on Facebook, they spend more time there instead of searching on Google or going somewhere else. As users spend more time on Facebook, advertisers become attracted. As more advertisers spend their ad dollars on Facebook, more app developers become interested; as more apps become available, users spend more time on Facebook… The virtuous circle spirals upward. Look at where Facebook is now, relatively to MySpace.

Also look at SalesForce.com. It is a pioneer of Web-based CRM software applications. Competing with software giants such as Oracle and SAP, which can spend massive amounts of money on software development, is certainly not easy. So, SalesForce creates AppExchange that lets independent developers, and users as well, to develop and market complementary applications…. [You can fill in the rest of the story].

There are more than just the network effect being at work. Amazon could have expanded its offering from books into other lines of merchandise on its own; but that would be very costly, slow and perhaps ineffective (after all, each line of merchandise requires unique “domain” expertise that takes years to build). By mobilizing other retailers to sell through its website, Amazon can accomplish the “Earths’ Largest Selection” mission very expeditiously. Furthermore, a major hurdle for online retailers is “order fulfillment” — once a customer places an online order, the merchandise has to be picked, packed, shipped and, if needed, traced. Amazon has spent around a billion dollar to build such a system. That system cannot be economically justified without the massive volume of sales to utilize it; yet, the massive volume cannot be generated without having such a system in place. Here is a chicken-and-egg problem — which one, sales volume or fulfillment system, should Amazon have first? By mobilizing resellers to Amazon site, the company can quickly build up the sales volume to justify the investments in building its fulfillment system. Scalability has been at work thanks to this. Likewise, it would be cost prohibitive and take foreever for Apple, Facebook and Salesforce to develop the massive volume of applications on their own. By mobilizing independent application developers, they can scale up very economically and expeditiously.

In the video clip above, the presenter suggests that the future lies with companies like Apple and Facebook (but not Google). That means these companies will be able to maintain their market leadership (while Google cannot, at least not so effectively). My question for you is: can they? That depends on their ability to lock-in their customers/users. In the case of Amazon, it would be very costly and time-consuming for someone else to develop an order fulfillment system of that scale and even more to replicate Amazon’s website operation capabilities (search, merchandise rating and recommendation functionality, payment processing, etc.). So, it should be difficult for resellers on Amazon to migrate elsewhere. But how about Apple, Facebook and Salesforce? As for Google, where can it finds and exploits the network effects?